Share Charge Agreement Template for Indonesia

A Share Charge Agreement is a vital security instrument in Indonesian corporate finance that creates a legal charge over company shares to secure financial obligations. Under Indonesian law, this document establishes your rights as either a chargor (share owner) or chargee (security recipient) while ensuring compliance with the Indonesian Civil Code, Company Law No. 40 of 2007, and relevant OJK regulations. The agreement transforms shares into effective collateral, providing security for loans, financing arrangements, and other commercial obligations.

When do you need this document?

You need a Share Charge Agreement when providing or accepting shares as security for financial obligations. This commonly occurs in corporate lending where banks require share pledges from company owners, private equity investments where investor protection demands security over portfolio company shares, and syndicated loan arrangements where multiple lenders need coordinated security interests. The document is also essential for margin trading facilities, acquisition financing structures, and joint venture arrangements where one party's shares secure performance obligations. If you're involved in restructuring distressed companies, share charges often form part of comprehensive security packages to protect creditor interests.

Key legal considerations

Several critical legal aspects require careful attention when drafting your Share Charge Agreement. The creation clause must clearly establish the security interest over specific shares, including detailed identification of share certificates, classes, and voting rights affected. You must define the secured obligations comprehensively, covering principal amounts, interest, fees, and potential future advances under revolving facilities. Enforcement provisions should specify your rights upon default, including power of sale, voting control, and dividend collection rights. Consider restrictions on further encumbrances and the chargor's ongoing obligations regarding share maintenance and corporate compliance. The agreement should address share transfers, corporate actions like rights issues, and requirements for additional security if share values decline below specified thresholds.

Legal requirements in Indonesia

Indonesian law imposes specific requirements that your Share Charge Agreement must satisfy to ensure enforceability. Under the Indonesian Civil Code and Company Law No. 40 of 2007, the agreement requires proper execution with notarial authentication for certain transaction types, particularly those involving listed companies or substantial amounts. You must comply with OJK regulations, especially OJK Regulation No. 6/POJK.04/2019, which governs security arrangements in financial services. For publicly listed shares, additional registration with the Financial Services Authority and share registrar is mandatory. The document must specify Indonesian law as governing law and Indonesian courts as having jurisdiction. Corporate authorization requirements include board resolutions from the company whose shares are charged, shareholder approvals where required, and compliance with any restrictions in the company's articles of association. Proper registration of the security interest ensures priority over competing claims and facilitates enforcement procedures.